Wikistrat recently concluded a three-week strategic simulation called “The EU in 2030″ in which our analysts looked into the future of the European Union. One of the policy options they created suggested that the EU should focus on forming an energy union, instead of a fiscal union. A summary is provided here.

After the creation of the banking union, there is no political will in Europe to push forward with integration policies. But the bloc faces a new energy reality. Much of its crude oil production is offshore in the North Sea, where Norway and the United Kingdom face maturing oil fields and declining production rates. Many states in the former Eastern Europe depend heavily on Russian oil and gas — a dependence they would much rather reduce.

Poland, Eastern Europe’s largest member states, should therefore take the lead. It is in a good position to drive the EU in this direction: Poland possesses its largest proven shale gas reserves, is building an LNG terminal and its energy production is heavily dependent on coal — which it is promoting (in spite of the EU’s environmental policies) as an alternative to Russian energy imports.

Under this policy option, Poland should start acquiring the energy portfolio in the European Commission that takes office in late 2014. It should also expand its role in the European External Action Service. Foreign Minister Radek Sikorski is already an unofficial candidate for the leadership of this institution. If Poland gets outplayed by other member states, it can follow the example of Germany and rely on its diplomacy to nominate officials to key background positions.

Step two involves quickly finalizing the Transatlantic Trade and Investment Partnership. This would expand opportunities for importing natural gas from the United States after 2017. Poland should enlist the help of especially the Baltic states and the United Kingdom to get the TTIP through as soon as possible. In the meantime, under Polish leadership and insistence, EU countries, especially Western ones, should build the necessary infrastructure for more LNG imports and the required distribution network.

This will set the stage for creating a new energy hub in Europe. Poland should lobby, on the heels of the trade agreement, for the widespread acceptance and the EU-funded development of fracking — at least in certain countries. Building on its own capacities, it should promote Poland-centered projects to link the Baltic states to the pan-European energy network and reduce the energy dependence of former Soviet satellite states on Russia.

Britain would be inclined to support this shift away from fiscal and political union and is one of the most enthusiastic backers of the TTIP. It partners with Poland to reinvigorate its special relationship with the United States.

France, despite its reservations about the transatlantic trade treaty, should also back this policy, seeing it as a way for Europe to “outgrow” its economic problems and avoid painful structural reforms. However, it will need a serious effort at building energy infrastructure, regasifiers and pipeline links in particular.

The Baltic states will support any initiative to decrease their dependence on Russian energy.

Bulgaria, the Czech Republic, Romania and Slovakia would support the policy for the same reason and also because it secures their energy supply after the gradual closing of their nuclear power plants.

Finally, Italy, always looking for additional sources of hydrocarbons, is one of the few countries that can afford to diversify from Russia without angering it due to other economic links and being already less reliant on it than most of its neighbors.

Wikistrat Analysts Nataliya Gudz, Gary Hunt, Lorenzo Nannetti and Andras Toth-czifra contributed to this analysis.

Wikistrat recently concluded a three-week strategic simulation called “The EU in 2030″ in which our analytic community looked into the future of the European Union. One scenario suggested that labor migration from Eastern to Western European member states could lead to permanent cultural and economic division. A summary is provided here.

Gross domestic product per capita in the EU (2008)

The migration of workers from Eastern and Southeastern European nations benefits the more advanced economies of Western Europe. Not only are they able to maintain their high standards of living, but some host countries, particularly Germany, continue to expand exports.

Yet increased migration challenges the social fabric of Western European societies. While legally limited in their ability to control intra-European migration, many of these states’ immigration and naturalization laws are, at least partially, based on blood and heritage.

Migrants from East and Southeast Europe earn less on average and in many cases lack the opportunity for naturalized citizenship. They are developing a resentment toward their new “homes.” Lacking the incentive to build a permanent life in Western Europe, many send remittances instead to their home countries. Resentment against them is rising in turn. Nationalist and Euroskeptic parties are becoming more influential. The lack of political leaders who can convincingly explain the benefits of immigration, and the rising resentment toward Eastern and Southeastern migrants, can be expected to block reform of the blood-based naturalization systems.

Because of the migration, Eastern and Southeastern European nation suffer a population decline. It are the young and the skilled who emigrate. This development negatively affects their economic growth and thins their tax base. As a result, their budget problems will worsen over time while skill shortages in their national labor markets are unresolved.

While the Eastern and Southeastern peripheries of the European Union thus become increasingly dependent on aid, Western European countries are less willing to provide it. Joining the eurozone becomes a far-fetched prospect. Witnessing the struggles of Italy and Greece to manage their economies without national monetary policies, Eastern and Southeastern European member states decide against adopting the single currency. (more…)